The classification question every owner assumes is settled
By Priya Jariwala
The maintenance contractor has been coming to your property every Tuesday for two years. You call him when the HVAC acts up. He shows up for the big jobs, too. You pay him every Friday. He does not get benefits, does not clock in, and does not appear on your payroll.
You have always assumed that arrangement is fine. Most owners do. The question worth asking this year is whether that assumption is correct.
The Classification Mistake
Worker classification is one of the most misunderstood legal exposures in hotel operations. It is also one of the most common. When a hotel brings on a contractor for housekeeping overflow, maintenance, landscaping, or shuttle service, a classification decision is being made whether the owner thinks about it that way or not.
The Internal Revenue Service and the Department of Labor both have tests for determining whether a worker is an employee or a legitimate independent contractor. The tests look at the nature of the relationship, not what you call it or what an agreement says. A written contract that labels someone a contractor does not make them one if the working relationship tells a different story.
The factors courts and agencies examine include how much control the property exercises over how and when the work gets done, whether the worker serves other clients or primarily one property, whether the tools and equipment belong to the worker or the property, and whether the work is a core part of the hotel’s regular operations.
A housekeeper who works set shifts, follows brand standards, uses your carts and supplies, and has no other clients looks a great deal like an employee regardless of what the agreement says.
The Department of Labor has long used an economic reality test to evaluate whether a working relationship is employment or independent contracting. That test looks at the full picture of how work functions, not any single factor in isolation. Enforcement priorities in this area have increased in recent years, and arrangements that once felt settled are worth revisiting.
Some states apply their own classification standards that go further than the federal test. Whether your state is one of them is worth a conversation with an employment attorney who knows your market.
Getting It Wrong Costs You Twice
Here is what most owners do not expect: When a misclassification surfaces, the financial exposure runs in two directions at once.
The first is taxes. Because payroll taxes were never withheld, the employer can be held responsible for both sides of that obligation, the share that should have come from the worker and the share the employer was required to contribute. That liability does not reset when the working relationship ends. It accumulates across every pay period the worker was on the property.
The second is wages. If that worker was legally an employee, they may have been entitled to overtime under the Fair Labor Standards Act every week they worked more than 40 hours. That overtime was never calculated because no one was tracking it that way. The hours are still countable.
In states with paid leave requirements or other employee protections, there may be a third layer of exposure on top of those two. The total is rarely small, and it grows in proportion to how long the arrangement has been in place.
The Arrangement That Looks Fine
The workers most commonly misclassified at hotel properties tend to share a few traits. They work on a recurring schedule, they perform work that is central to daily operations, and the property has meaningful control over how the work gets done, even if no one has thought about it in those terms.
Housekeeping contractors who cover high- occupancy periods, maintenance workers who are effectively on call for a single property, shuttle and transportation staff at airport-adjacent hotels – these are the arrangements that most often look fine on paper and carry the most risk underneath.
The question is not whether the arrangement feels informal. Plenty of legitimate contractor relationships feel informal. The question is whether the economic reality of how that person works looks like employment. If it does, the label on the agreement does not change the answer.
Taking a Closer Look
The best time to review worker classification at your property is before a complaint is filed or an audit begins. A misclassification finding that surfaces through enforcement comes with penalties and interest that a voluntary review does not.
Start by listing every person your property pays for recurring work who is not on your standard payroll. For each one, ask honestly whether that worker controls their own schedule, works for other clients, provides their own tools, and sets their own rates. If most of those answers point back to your property, the classification is worth a closer look.
The Department of Labor publishes its current worker classification guidance at dol.gov. Reviewing that guidance alongside your specific working arrangements is a reasonable starting point, and many owners find it useful to bring those specifics to an employment attorney or a payroll and HR professional who understands the hospitality context.
The goal is not to convert every contractor relationship into full employment. Some legitimate contractor arrangements serve both the property and the worker well. The goal is to know which of your arrangements can actually support that classification and which ones cannot.
The contractor who has been coming every Tuesday for two years is either a contractor or he is not. It is worth knowing the answer before someone else decides it for you.
Priya Jariwala is a workforce management consultant at isolvedHCM, an Allied Member.
Image: NASIH/stock.adobe.com
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